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What it argues
Barbarians at the Gate is Bryan Burrough and John Helyar's account of the 1988 leveraged buyout of RJR Nabisco, at the time the largest corporate transaction in history. The deal was $25 billion. The participants were some of the most powerful figures in American finance — F. Ross Johnson, the CEO who wanted to take the company private to cash out personally; Henry Kravis and George Roberts of KKR, who had pioneered the leveraged buyout as a financial instrument; and a cast of investment bankers, lawyers, and advisors whose fees ran into hundreds of millions of dollars. Burrough and Helyar reconstructed the six-week bidding war from interviews with virtually everyone involved and produced something closer to a novel than a business history.
The story works on two levels. The first is a financial thriller: competing bids, last-minute revisions, boardroom maneuvering, and phone calls at three in the morning as advisors scrambled to find another hundred million dollars somewhere. The mechanics of the LBO are explained clearly enough that readers without financial backgrounds can follow the logic of the deal, understand what leverage does to returns and risk, and see why the participants were willing to fight so ferociously over who won.
What it gets right
- 1.
Leveraged buyouts work by using the target company's own assets and cash flows as collateral for debt, amplifying returns (and risks) dramatically.
- 2.
Ross Johnson's miscalculation was assuming the RJR board would protect him as CEO if he brought them a buyout proposal. They were more interested in the highest price.
- 3.
KKR's Henry Kravis brought institutional discipline to a process that Johnson and his advisors treated as improvised self-enrichment. Discipline won.
What it covers
Who wrote it
Bryan Burrough is an American journalist and author who spent more than a decade as a staff writer at The Wall Street Journal, where he co-reported the RJR Nabisco story with John Helyar that became the basis for Barbarians at the Gate. Helyar is a business journalist who later wrote Lords of the Realm, a history of baseball and money. Burrough has subsequently written several other narrative nonfiction books including Public Enemies (on John Dillinger and J. Edgar Hoover) and The Big Rich (on Texas oil dynasties). Barbarians at the Gate, published in 1989, is widely considered one of the defining business books of the twentieth century and was adapted into an HBO film in 1993.
